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Continued from page 2

The hedge fund chief was found guilty of 14 counts of conspiracy and securities fraud and sentenced to an 11-year prison term, the longest sentence ever handed down in an insider trading case. The investigation into Galleon also added dozens of co-conspirators, including Gupta, to the government’s dragnet.

It was a resounding victory for the government with wiretaps playing the key role.

In the Gupta trial, prosecutors also relied on a handful of wiretaps. One conversation between Rajaratnam and Gupta from July 2008, for instance, revealed a discussion about Goldman’s potential purchase of Wachovia (which later merged with Wells Fargo) or AIG to beef up its sagging fortunes. Yet, Rajaratnam never traded on the information so the incident did not lead to a charge of securities fraud.

Other wiretapped conversations revealed Rajaratnam making oblique references to information he had potentially received from Gupta.

The wiretaps certainly helped the prosecution but alone represented a small part of the government’s case. Instead, the two Assistant U.S. Attorneys who led the prosecution, Reed Brodsky and Richard Tarlowe, largely relied on traditional pieces of evidence: phone and trading records, witness testimony, and a multitude of documents.

The lack of “direct evidence,” a refrain Gupta’s lawyer Gary P. Naftalis made frequent references to during his closing arguments, differentiated the case from Rajaratnam’s in that it resembled a traditional insider trading prosecution relying on circumstantial evidence.

At the end, the lack of revealing conversations available through wiretaps didn’t doom the government’s case. As the judge instructed jurors after the closing arguments: "The law makes no distinction between direct and circumstantial evidence." In this instance, that circumstantial evidence in the mold of traditional insider trading cases proved to be convincing enough for the jury.

3. Should Gupta have testified?

One of the most difficult, often gut-wrenching decisions for any defendant is whether to testify. On the one hand, it allows a defendant to directly address a jury and allow them to make a decision – conscious or otherwise – about a person’s character and credibility. On the other hand, it opens a defendant up to uncomfortable questions he may find difficult to answer.

In his closing remarks, Naftalis began to explain that Gupta had wanted to testify but was advised not to do so by his defense team before an objection cut him short.

Gupta’s testimony could have certainly helped his cause by confronting some of the evidence lined up against him. Through phone and trading records, prosecutors showed that on September 23, 2008, for instance, Gupta called Rajaratnam within seconds of finishing a conference call in which Goldman’s board discussed Warren Buffett’s $5 billion investment in Goldman. Moments after Gupta’s call to Rajaratnam, Galleon’s chief ordered his traders to purchase more than 200,000 shares of Goldman’s stock. When news of Berkshire Hathaway’s investment came out hours later, it became clear to the investing public that Goldman’s fortunes had risen amidst the darkest moments of the financial crisis.

Had Gupta testified, he could have offered an exculpatory explanation of his phone call. Why had he called Galleon so quickly after finishing his board meeting? What had he discussed in the brief conversation with Rajaratnam? The decision to stay quiet made it difficult for Gupta’s defense team to provide these alternative explanations, relying on documents and the testimony of others, like Gupta’s daughter, to speak about Gupta’s mindset. None of these served as an adequate substitute for Gupta’s own words, however.